Winners compete, losers cheat

I naively once believed that the American state really believed in free trade. It certainly spent a lot of time preaching the benefits of free trade in the 80s and 90s and even into the 2000s.

When first visiting China in 2002, it struck me that there were Holiday Inns and Marriotts in Beijing, and a Starbucks in the Forbidden City which also happened to be sponsored by American Express. Chinese hotel and coffee brands were simply not as good as American ones. Thanks to free trade Chinese could also enjoy the best hotels and coffee.

I imagined that one day Chinese companies would also be better at some things than American companies. Just like Chinese could enjoy Starbucks in the Forbidden City and stay in high quality American hotels, one day Americans would perhaps enjoy tea from a high quality yet-to-be-created tea shop chain on the National Mall in Washington, DC. Free trade would go both ways, rewarding the best producers and delivering benefits consumers around the world.

As Chinese companies started moving up the value chain and becoming more competitive though, America changed its tune. Each newly successful Chinese product or service of significance was labeled a threat to national security and accused of being run by or for the Chinese military.

It’s gotten to the point where the USA, far from singing the tune of free trade, is now banning many of the world’s best companies and products from its shores: the best drone company, the best consumer camera company, the best network hardware company, and most recently this week, the best robot companies…all banned

Banning your competitors is not a winning strategy. The Chinese know this because foreign competition and cooperation through joint ventures helped to make their companies great. Chinese EV companies are great because their consumers have the option to buy American EVs. Chinese hotel chains have improved their game because they have to compete on their home turf with Marriott, Hyatt, IHG, Accor and other foreign brands. DJI’s and Insta360’s action cameras are excellent because if they’re not, Chinese consumers will just buy Americans GoPros.

This isn’t to say that policies might not be needed to create the circumstances where American robot companies can become competitive with Chinese robot companies, but one of those policies is not completely protecting American robot companies from any amount of Chinese competition. That’s a recipe for laziness and rent collection. Winners compete, losers cheat.